Welcome to the Ratos Audiocast for Teleconference Q3 2021. For the first part of this call, all participants will be in a listen-only mode, afterwards, there will be a question- and- answer session. Today, I'm pleased to present Jonas Wiström, CEO. Please begin your meeting.
Thank you so much. Good morning. A warm welcome to all of you on this earnings call targeting the interim report for Ratos' third quarter. My name is Jonas Wiström. I am the CEO and President of Ratos. By my side, I have our CFO, Jonas Ågrup, and our new VP for Sustainability, Josefine Uppling, who joined us and our management team during Q3. We have actually seen an increasing interest for Ratos and the Ratos share. I believe some of you are with us for the first time.
We will therefore start up with some comments and clarifications around Ratos before we head into the results for the third quarter. I ask you to move to slide number two. As of this quarter, Ratos is no longer an investment company. Jonas Ågrup will come back to this in his presentation.
We want to own companies that are or can become market leaders. I think this differentiates us from other company groups. We have strong brands. We have companies that can serve as a platform for more add-on acquisitions. We live our core values. We believe strongly in a decentralized structure in Ratos and our companies, both of them. Our 12 companies have a total turnover of some SEK 34 billion. In Ratos AB, we are today 18 employees. Actually, when I started here a couple of years ago, we were 53.
Today we have a different competence mix than was the case when we were an investment company. Moving to slide three. We are a business group that have our headquarters in the Nordics. We are actually present globally with sales locations and manufacturing locations in Europe, North America, South America, Asia, and even Australia.
Let's move to slide four and look at the five-year summary for the Ratos Group, not the company group, but the Ratos Group. I am really proud of the turnaround journey that has been a prerequisite for starting our growth journey with acquisitions as a very important component. Let's move to our financial targets. We have a target of having an EBITDA to at least SEK 3 billion by 2025. We have a conservative leverage target, and since a couple of years, we have a new dividend policy.
With that, we move to slide six and come into the third quarter, where we improved the earnings in our companies. We had a strong order intake, and we have two new acquisitions. Page seven is a summary of the consolidated EBIT in Ratos. That is improving.
We have an impact from unrealized costs related to revaluation of Dun & Bradstreet shares. We believe in these shares, and it was a result of investing a part of what we gained from the Bisnode sales. During the quarter, we also had an unusually high tax rate since the unrealized cost is not deductible. The adjusted EPS for the quarter was actually up 61%. We also had a significant improvement of net financial items, which Jonas Ågrup will come into later. With that, let us go into our company group on page eight and our business areas.
Sales and EBITDA in the current company group continues to grow despite all the challenges we have right now in the world. Organic growth are up 2%, and adjusted EBITDA is up 3%. This in what I would call semi-post-COVID times.
The challenges I talked about, you know all about them. Freight costs up almost to 1,000% from freight from Asia to Europe, lack of components and materials. We have low vaccination levels in Asia, in some of the countries we're bringing in goods from, and we also have a ship wharf in Thailand, as you might know. Six out of 12 companies are actually growing EBITDA by 59% or more, and nine out of 12 companies is improving their EBITDA.
Our cash flow is impacted by Plantasjen, which is when they are increasing their stock to ensure that we can meet customer demand in the coming seasons, not only the Christmas season, but also the early spring. We are now in a situation where just in time sort of have been replaced by stock is king. I'm very satisfied with that increased stock in Plantasjen.
Last but certainly not least, we have a very high M&A activity. Two acquisitions have been made in Q3. These two are contributing with yearly revenues of more than SEK 1 billion. If we look year to date, we have acquired six companies, with an estimated annual revenue on roughly SEK 1.9 billion. I'm really pleased with the EBITDA and sales and acquisition development in the company group. I want to leave to you, Jonas Ågrup, to take us through slide nine.
Okay. Thank you, Jonas. I will talk a little bit about the leverage and also the centralized financing that we have been working to set up during the last couple of quarters. If we look at the net debt for Ratos, it continued to decrease to the net cash position of SEK 1.6 billion in the third quarter this year, compared to actually a net debt of SEK 2.6 billion in the third quarter last year.
Leverage was, of course, impacted positively by the divestment of Bisnode in the beginning of the year. If we look at the leverage net debt to EBITDA, we were at -0.9x in the quarter. In the same quarter last year, we were at 1.4x . Cash flow from operations were negative, SEK -56, last year, SEK 205.
In the third quarter, we were impacted by Plantasjen actually taking steps to secure seasonal inventory on account of supply chain challenges. What we have seen, as you probably all know, is low freight capacity, mainly out of China to Europe, and consequently, much higher freight cost. If we look at our financial position, today, we have a possibility to make acquisitions of roughly SEK 9 billion with a maintained leverage at or below 2.5x , which is in line with our financial target.
In the quarter, leverage decreased to -0.9x , despite acquisitions of almost SEK 300 million in the third quarter. Ratos is a company group and a treasury function is now in place, and we have also a new RCF agreement signed with three external banks with a possibility to borrow SEK 3 billion.
We also have been setting up a group cash pool between Ratos and the group companies, and this will be in place during the fourth quarter this year. If we look at the contribution of the centralized financing so far, we have positive interest cost savings of approximately SEK 616 million in the third quarter this year. On a yearly basis, we estimate savings to be approximately SEK 75 million. In the fourth quarter, two more companies in the group will be financed via Ratos as we will add financing of roughly SEK 250 million in the fourth quarter.
Ratos is a company group, and as of the beginning of August this year, Ratos is also, from a tax point of view, an operating group, and what we say in Sweden, [Foreign language] , and not an investment company anymore.
This means that Ratos will no longer be taxed as an investment company. Ratos has SEK 13.9 billion in loss carry forward with a value of SEK 2.8 billion at current tax rate, which means that profits generated by Ratos AB will not be taxed as long as the loss carry forward remain. Back to you, Jonas.
That's good tax news, Jonas. Thank you. Let's move to slide 10 and start to look at our business areas. Construction and Services had a great quarter. Aibel continues to grow both sales and EBITDA. airteam, suffering from project delays due to mainly the delay of supply of materials. Lower sales was due to that many projects are in early phase. Lower sales is the main contributor to lower EBITDA, although the profitability is actually slightly higher in HENT.
Vestia had yet another great quarter with high growth of sales and EBITDA. All in all, good EBITDA growth and a good quarter for construction and services. Let's move to slide 11 and business area consumer. Here we had organic growth increase by 6.4%. Strong sales in KVD due to more and more cars are sold from own book instead of being broken.
Strong EBITDA growth as a result of the acquisition of Forsbergs into KVD. It's a great quarter for KVD. Oase Outdoors, very strong EBITDA growth in the quarter. Coming back to stock, this is due to unusually strong demand for their products, which is a result of really lower season stock clearance. Yet another strong quarter from Plantasjen with improved assortment mix and improved efficiency through the organization. Again, strong quarter for consumer as well. Let's move over to slide 12, where we take a look at business area industry. Continues to grow.
However, in Diab, sales was down 11%. That is due to the fact that the wind market sales is down 28%. I think no one believes that wind power is nothing for the future. The wind market will, over time, continue to grow a lot.
As you know, the wind and the energy industry in total are dependent on political decisions and subsidies, et cetera, and they were taken away in China last year, which is the biggest market for wind. We estimate the sales to come back. There have been increased costs for materials, and the wind industry is going through a material shift in the wind blades that will go on in this year and next year. HL Display, yet another strong quarter. Strong organic growth and one more add-on acquisition in the quarter affecting only September, but it's important acquisition in Italy.
HL is also impacted by cost increases for freight and raw materials. Ledil shows fantastic growth, 42%. The order book is also very strong, and the very strong increase of EBITDA is pure organic. TFS, as you know, has had a good year.
Net sales was up 29%. We used to talk about the service revenue, which is excluding the pass-through revenues, but the service revenues are also up 21%. There's a small EBITDA improvement in the quarter since Q3 last year was impacted by release of extraordinary project provisions. With that, we move over to an ever so important area, which is the sustainability topic on page 13.
During the quarter, our new Vice President for sustainability and communication, Josefine Uppling, joined us and our management team. She brings extensive knowledge from senior positions in the banking industry to Ratos. Josefine, I want to leave the word to you to talk about sustainability and Ratos.
Thank you so much, Jonas, and I'm very excited to be on board, of course. It started the September 1st, and so far, I can say that I am impressed with what I see. It's obvious that the companies in Ratos Group contribute considerably to a long-term sustainable development, and that is actually both in terms of development in the broadest sense, but most important, the companies both support and actively drive the development of current ESG trends. We have listed some really good examples on the slide.
Two very tangible areas where the Ratos companies are contributing is in the industrial wooden construction area, and also in the circularity in the plastic industry. We can say that one of our proudest moments in the sustainability area in the quarter was the inauguration of the Sara Kulturhus in Skellefteå, which actually is the highest wooden building in Sweden.
That was a great moment for Ratos and our constructor, HENT, who was the main constructor for the project. Of course, we have Aibel, who continues to successfully transform towards becoming fully focused on renewable energy by the end of this decade, and that's a very impressive journey to follow. As I mentioned, the circularity in the plastic industry is a very important area, there we can see both Diab and HL Display, which are participating in several development projects in the area.
Last, but definitely not least, during the year, Ratos has been working on a project with all the companies within the business group targeting the EU taxonomy. The aim with that project is to increase knowledge and align reporting. It's very obvious that the EU taxonomy will set new standards and increase transparency, and this is a development we at Ratos strongly support.
Thank you, Josefine. Wooden buildings, I was down and visited the commission a couple of weeks ago, and it was a lot of talking about buildings in wood being a very important factor to take down CO2 in Europe. HENT, they've been doing this since 2005, I think.
Yes.
Didn't they build the highest building in wood also in Norway?
Actually, they did. They have been part of two world records, actually. The highest wooden building in Norway, and now the highest building in Sweden as well. That's impressive.
Thank you so much, Josefine. With that, we move to slide 14 and our acquisition strategy and how we will succeed. As I stated earlier, our transformation from investment company to business group is now done, and our full focus is to continue the development in the companies, including acquisitions. We are looking for three categories of acquisitions.
The add-ons, the adjacencies, and the platform acquisitions. The add-on acquisitions we believe is extremely value-creating. They are and will be driven more and more decentralized by company-driven processes, even though Ratos provides specialist support.
Our group companies, since they have the size and brand, are often seen as natural consolidators. The add-ons are usually bilateral processes, more attractive valuations. I think the last two, we were around an EBITDA multiple of 5x, and they contain a lower risk. We love cost and revenue synergies by consolidating markets and companies.
Adjacencies, they are normally identified by Ratos. They target the same industry as current platforms we have today. We look for soft synergies with cross-pollinations, and some will be integrated, some will not over time. I think it's interesting to look what's happened between HENT and Vestia. HENT's CEO is in the board of Vestia's board, and Vestia CEO is part of HENT's board. The partnership between these two companies is becoming closer for each day that passes. Actually, a joint tender, quite a big one, was submitted for a partnering project just after Q3.
Platform acquisitions, here we are looking for companies that are market leaders or have the potential to become one. We look for sizable EBITDA and companies that can be a natural consolidator in a fragmented market. Markets are important to us. We want them to be attracting and growing.
We focus on high-quality companies with a solid track record. We like companies that have been down, but we've been through a tougher business cycle in their health history, as an example, and of course, strong management teams. Next, slide 15, is what lies behind this strategy. Our companies, in general, have a high cash conversion rate, which give us, of course, strong cash generation that can fund our acquisition journey.
As Jonas Ågrup pointed out, we made acquisitions for some SEK 300 million in the quarter, and still in spite of the fact that we increased stock levels, et cetera, we had a better, even stronger balance sheet after these acquisitions. In the coming years, acquisitions will be a very important component in reaching or beating our EBITDA targets for 2025.
As Jonas said, we have actually SEK 9 billion to spend today and still stay within our leverage targets. I also like to point out that we have a very strong team for acquisitions here in Ratos. That team includes also two experienced legal M&A persons. Magnus was the head of the legal M&A at MTG.
Jacob was a colleague to me in my previous CEO role in ÅF, where we made some 70 acquisitions together with a team. I think all in all, the individuals in Ratos have experience from more than 150 acquisitions. On page 16, if we move to that, I'm not going to go through all of this. Just to note that we have made one adjacent acquisition in Vestia and five bolt-ons.
In Q3, we added SEK 1 billion in yearly revenue, and in total, we have added so far this year SEK 1.9 billion. With that, page 17, short summary. Strong order intake in the quarter, up 32%, positive organic sales 2%. EBITDA continues to increase in our company group.
Nine out of 12 companies improved their EBITDA. Six actually were some 60% EBITDA growth or more. Cash flow impacted by inventory buildup, and leverage is improving. Yet again, acquisitions have been performed, and we have strong funding for firepower, strong competence. We look very positive on the future. We have an exciting period in front of us. Thank you so much.
And if you have a question for the speakers, please press zero, one on your telephone keypad now.
Okay. Now let me see. Where is the first question?
This is the question. Next stack of questions.
Okay. We have Hi Max from Handelsbanken. You ask, could you just remain on how big the e-commerce is of Plantasjen's total sales? In the quarter, it's about 3.4%. I think it's SEK 160 million. Jonas over is the number. It's still a small proportion of the sales, but it has increased a lot during this year.
Georg Attling from Pareto. Hi, Georg. Leverage is now significantly below target. Can we expect M&A activity to pick up and/or extra dividends so that the leverage moves toward the target? Well, absolutely. We do have a high M&A activity. We acquired two companies, what I mean with high M&A activity is that we are evaluating a high number of acquisitions targets. We are also very selective. Absolutely, it looks very good for the future.
Sorry, I missed one more question from Max in the component shortage and shipping cost. What is the status for Q4? Has it improved or worsened? I would say it hasn't worsened. It hasn't really improved. It's sort of flattening out. We expect those things to be affecting also Q1, but we don't see any growth here. We see vaccination level, which affects us as well, are increasing in the quarter.
That is getting better and better, and I think the other have flattened out and maybe will decrease. We can hope for that. It's very important for us to match this with cost increases to our end clients. That's a process that takes some time, but more will happen on that in Q4.
We don't have any audio questions at this point.
Yeah, I have another question here from Peter Lindvall, Kavaljer. Strong balance sheet and low valuation on the Ratos stock. Have you considered buybacks to increase shareholder value? This is, of course, a board issue, but we have an ambition acquisition agenda. Our goal is to, of course, increase shareholder value by using our strong balance sheet to make more really great acquisitions. No more questions? In that case, I want to thank you for participating in this call, and don't hesitate to contact Josefine or Jonas or me for any questions that might come up later. Thank you so much.
This concludes the conference call. Thank you all for attending. You may now disconnect your lines.